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Assignment 3: Long-Term Investment Decisions
March 9, 2014
Managerial Economics and Globalization ECO 550
Capital Budgeting Decisions
Introduction
A low calorie food or a healthy option of food is a new concept, which has gained a lot of interest in the recent times. In the previous assignment, we had discussed the background and the introduction of the company, which wants to cater to this segment. This paper will discuss the long-term capital budgeting decisions that such a company needs to make.
Online a plan those managers in the low-calorie microwavable food company could follow when selecting pricing strategies for making their products as inelastic as possible.
The company aims to keep the prices of its products as inelastic as possible. This means that the pricing strategy should have no impact on the way the consumers perceive and buy such products. Generally we see such demand only in situations in which the good or services are indispensable and the consumers cannot do without those. However, this is not the case for microwavable food products. There is competition in the market to keep the prices under check. Hence, the company needs to do two things to make its prices inelastic-
First of all the company needs to spend money on the R&D efforts to differentiate its products from the rest of the players. This differentiation depends on the core product, advisory service that comes along with the product, packing, availability, support services or virtually anything else.
As the second measure, it needs to send down two important messages to its potential as well as current customers through its marketing communication efforts- First that the low calorie food should not be choice but essential and second that the company serves this essential requirement like no one else does. Once the customers are aware and agreed with these two messages, price will play very minimum role in their buying decision.
Examine the
March 9, 2014
Managerial Economics and Globalization ECO 550
Capital Budgeting Decisions
Introduction
A low calorie food or a healthy option of food is a new concept, which has gained a lot of interest in the recent times. In the previous assignment, we had discussed the background and the introduction of the company, which wants to cater to this segment. This paper will discuss the long-term capital budgeting decisions that such a company needs to make.
Online a plan those managers in the low-calorie microwavable food company could follow when selecting pricing strategies for making their products as inelastic as possible.
The company aims to keep the prices of its products as inelastic as possible. This means that the pricing strategy should have no impact on the way the consumers perceive and buy such products. Generally we see such demand only in situations in which the good or services are indispensable and the consumers cannot do without those. However, this is not the case for microwavable food products. There is competition in the market to keep the prices under check. Hence, the company needs to do two things to make its prices inelastic-
First of all the company needs to spend money on the R&D efforts to differentiate its products from the rest of the players. This differentiation depends on the core product, advisory service that comes along with the product, packing, availability, support services or virtually anything else.
As the second measure, it needs to send down two important messages to its potential as well as current customers through its marketing communication efforts- First that the low calorie food should not be choice but essential and second that the company serves this essential requirement like no one else does. Once the customers are aware and agreed with these two messages, price will play very minimum role in their buying decision.
Examine the
References: Amadeo, K. What Is Being Done to Control Unemployment? Retrieved Feb 21, 2014, from About.com: http://useconomy.about.com/od/supply/f/unempl_control.htm Charron, D. C. (1985a) Individual Responsibility and the Business Firm. Ph.D. Dissertation. St. Louis: Washington University Department of Phi- losophy. Filipovic, J. (2013, November 17). To save Americans ' health, government must intervene in food industry. Retrieved Feb 21, 2014, from Aljazeera: http://america.aljazeera.com/opinions/2013/11/fda-food-trans-fatban.html Morgan, A. (2009) Managing your capital project. PricewaterhouseCoopers. Price Elasticity of Demand. Retrieved Feb 21, 2014, from Shmoop: http://www.shmoop.com/supply-demand/price-elasticity-demand.html Ralston, K. How Government Policies and Regulations Can Affect Dietary Choices. AIB 750. Retrieved Feb 21, 2014, from http://ers.usda.gov/media/91084/aib750q_1_.pdf Shareholders versus management. Retrieved Feb 21, 2014, from http://insight.kellogg.northwestern.edu/article/shareholders_vs_management_split_decision/